Last Updated on May 13, 2022 by Elizabeth


Don’t know a CDW from an AWD? And what the heck is a Concession Recovery Fee? When you’re renting a car, it’s very handy to learn a bit of industry terminology. That way, there are no nasty surprises. Here’s an A-to-Z glossary of car rental terms you may see on your rental agreement.

Additional Drivers

The only drivers allowed to drive a rental car are the primary driver and those listed on the rental agreement. Car rental companies typically charge a few dollars extra per day for each for additional driver. There are a few other exceptions. In most states, car rental companies must allow your spouse to drive the vehicle. The conditions are that he or she must have a valid license and be at least 18 years of age. If you’re renting with a company discount code, coworkers may be able to drive as well.

Additional Equipment

Based on availability, you may be able to request other items. These include infant and child booster seats or ski racks for a nominal additional fee.

Additional Rental Charges

If you return the car late, the rental company may charge you an extra day’s rental for each 24-hour period following the return time at then current rental rates. Many companies allow a short grace period (typically 29 minutes) to return the vehicle after the return time without a penalty.

All Wheel Drive (AWD)

Rental car companies tend to lump AWD together with Four Wheel Drive (4WD), resulting a vehicle category that mainly includes SUVs and trucks. There are differences between AWDs and 4WDs. But in a nutshell: AWD can handle bad weather, while 4WD conquers tough terrain. Most renters look for AWD/4WD vehicles if they expect to drive in snow. That’s because rental contracts usually do not allow off-roading.

Arena Center Surcharge

Taxing rental cars to pay for major projects like stadiums or convention centers is a frequent practice. For example, in Kansas City, you’ll see a flat $4 fee on your bill to pay for an unoccupied arena in the downtown area.

Collision Damage Waiver (CDW)

This optional collision cover waives your responsibility to the rental company for damage to the rental vehicle if you have a collision with another vehicle. You may already have coverage through your personal car insurance or credit card benefits. (Typically synonymous with LDW, or Loss Damage Waiver.)

Before renting a car, check with your current car insurance provider to find out if your policy extends to rental vehicles. Also, check with your credit card company to see what protection it offers. Many cards provide automatic insurance coverage when you pay for a rental using that card.

Concession Recovery Fee (CRF)

Airports charge rental car companies for the privilege of doing business on site, and the rental companies pass this percentage-based fee on to the renter.

Contract Modification Fee

If the rental car company had to change your contract after you’ve picked up the car, you may see this fee. For example, if you return your rental car at a time that is earlier or later than what is on your contract, the company may lose revenue as a result.

Convention Center Surcharge

Taxing rental cars to pay for major civic projects like convention centers is a frequent practice. For example, in Boston, you’ll see a flat $10 fee on your bill to pay for the construction and renovation of convention centers in five Massachusetts cities.

Corporate Discount Program (CDP)

Most rental car companies have partnerships with companies and organizations (e.g., AAA, AARP or Costco) that provide employees and members with lower rates than those offered the general public.

Customer Facility Charge (CFC)

The airport charges this daily fee and the rental car company collects it to pay for the maintenance of the car rental facility at the airport.

Diminished Value Fees

Been in an accident in your rental car? You may receive a bill for this charge, which covers the difference in resale value for the rental car before and after the incident. If you purchased the CDW/LDW at the rental counter or through a third-party insurer, you’re in the clear. Your personal auto insurance policy may not cover diminished value. Few credit card companies cover this charge, even if you rented the vehicle with their cards.

Buy Damage Insurance For Less Than What You’ll Pay at the Rental Counter

Drop Fee

This one-time fee is often charged when a vehicle is dropped off at a different location than it was picked up from. Note that sometimes, a higher base rate is charged in lieu of a separate drop fee. If the return location is different than the one agreed upon in advance (on a reservation or at the rental counter), this is termed an Unauthorized Drop, and the fee may be higher.

Excess Insurance

See Super Collision Damage Waiver (SCDW), below.

Fuel Purchase Option (FPO)

If you opt for the FPO, you prepay for a full tank of discounted gas at the time you pick up the car. This is only a break-even option (at best) if you can return the car with a completely empty tank. You are charged whether you use all the gas or not, and there is no refund for unused fuel. (Some locations even charge rental taxes on the price.) If you don’t choose this option, be sure to return the car with a full tank or you’ll be charged through the nose to refuel the vehicle.

Highway Use Tax

Some states, such as North Carolina, impose a fee on all car rentals as a source of revenue for maintaining and improving roads.

Late Return Charge

If you return the car late, the rental car company may charge this fee to compensate for any costs it incurs to find an alternate vehicle for the next customer for your rental car.

Loss Damage Waiver (LDW)

This optional coverage waives your responsibility to the rental company for damage to the rental vehicle if someone steals or vandalizes the car while in your possession, if a limb falls on it, or if it befalls some other non-collision damage while the car is in your possession. (Often synonymous with CDW, or Collision Damage Waiver.)

Check with your personal car insurance provider to find out if your policy covers rental vehicles. Also, check with your credit card company to see if there is protection for car rentals.

Loss of Use

Does your rental car need a trip to the auto shop? This fee, which may not be automatically covered by your personal car insurance, replaces the daily income the rental company loses while a damaged car is being repaired. You’re automatically covered by your personal car insurance if you live in one of these eight states: Alaska, Connecticut, Louisiana, Minnesota, New York, North Dakota, Rhode Island and Texas. Some credit card companies will also cover loss of use if you rented the car with their cards.

Motor Vehicle Rental Tax

Many states levy a tax on short-term car rentals of a month or less as a way of creating revenue.

One-Way Rental

When the rental car is returned to a location different from the pick-up location, it is a one-way rental. Note that higher rates or extra fees (see: Drop Fee) usually apply for one-way rentals.

Parking Fine Recovery Fee

Renting a car in Massachusetts? The Bay State requires car rental companies to collect this fee to offset the cost of unpaid parking tickets by car rental customers.

Parking Surcharge

Typically seen at airport and city locations, this fee is charged by rental car company to reimburse it for the high cost of parking space at the location.

Personal Accident Insurance (PAI)

A.K.A. Personal Injury Protection (PIP). In the event of an accident, this optional supplemental insurance covers medical costs, ambulance and death benefits for the renter and passengers traveling in the rental vehicle. If you already have sufficient health and life insurance, you may find you do not need this extra coverage.

Personal Effects Coverage (PEC)

A.K.A. Personal Effects Protection (PEP), this optional coverage provides protection if there is loss or damage to your belongings in the rental car. If you have a homeowner’s or renter’s insurance policy, it likely already covers your belongings.

Roadside Assistance

This optional coverage provides roadside assistance in case you lock yourself out of the car, lose your key, have a flat tire or a dead battery, or need a tow. If you own a car, you may already have access to roadside assistance through your personal auto insurance, credit card benefits or through an organization such as AAA.

Super Collision Damage Waiver (SCDW)

This type of collision cover is common in Europe and other parts of the world. Think of the SCDW as collision insurance plus coverage of the “excess,” or deductible. Rental car companies in Europe and some other parts of the world protect themselves by putting a preemptive hold on your credit card to cover this excess.

Supplemental Liability Insurance (SLI)

A.K.A. Additional Liabiltiy Insurance (ALI), Liability Insurance Supplement (LIS), or Supplemental Liability Protection (SLP), this insurance provides coverage (often up to $1 million) in the event of an accident that causes bodily injury or property damage to someone other than the renter and passengers in the rented vehicle.

In most states, the rental company must provide state minimum coverage by law, so you usually don’t need to buy any extra coverage to meet legal requirements. If you have a personal auto insurance policy, it should also cover you when you operate a rental vehicle, so buying SLI is likely not necessary. If you don’t have your own car insurance or, for whatever reason, you don’t want to risk having to file a claim, then it may be a good idea to get SLI.

Tourism Surcharge

A.K.A. a “tourist tax,” this fee is imposed by some states to pay for activities related to tourism. For example, Connecticut and Utah require car rental companies to charge a tourism surcharge.

Underage Surcharge

A.K.A. a “young driver fee,” this surcharge is levied on drivers under age 25. Major rental car companies will rent to licensed drivers who are at least 21 years old (and in some states as young as 18) as long as they meet other (and often fairly strict) rental requirements.

Uninsured or Underinsured Motorist (UM/UIM)

This supplementary coverage pays for your medical expenses—not car damage—if someone with little or no insurance is at fault in an accident with you. Many states have laws requiring uninsured motorist insurance in order to protect drivers in the state from financial disaster after an accident. If you have adequate health care insurance, you are likely covered already.

Vehicle License Recovery Fee

DMVs often charge car rental companies higher fees to register and title their vehicles. Some states allow the rental companies to pass on some of those costs to the renter as license recovery fees.